If you're getting a tax refund from the government, you don't have to worry about filing a few months late. When you owe money and file late, the IRS charges interest on your tax bill, so the longer you wait, the more your debt grows. If you expect a refund, however, there's no tax debt on which to charge interest.
If you want your refund, you have three years after this year's April tax deadline to file. The IRS operates under a statute of limitations: unless it suspects fraud, or you've under-reported taxes by more than 25 percent, it closes the book on returns filed more than three years ago. You don't have to worry about the IRS auditing a 20-year-old error, but the flip side is that the government doesn't have to pay out if you dawdle past the three-year deadline.
Hang on to whatever paperwork you have for this year's taxes -- W-2 forms, 1099s, cancelled checks for expenses -- until you finally get around to filing. Even after you use them to calculate your taxes, keep them until the three-year audit deadline passes. The risk of an audit hovers around 1 or 2 percent for most people, but if you fall into that 2 percent, you need documentation. If you never file for your refund, keep the paperwork anyway. Without a return, the IRS can keep your case open.
The biggest risk in filing late isn't that you lose your refund; it's that you're wrong about how much you owe. If it turns out you should have paid taxes, filing late makes you liable for interest and penalties. For each month you file late, the IRS can charge 5 percent interest, up to a maximum 25 percent of the missing money. If you think there's any possibility of error, double and triple-check your figures so that you know you're on safe ground.
Filing for an extension is simple. If you submit Form 4868, you don't have to submit your tax paperwork until six months after it's due. This only applies to your tax forms, however: if you owe any money, it's still due in April, and the IRS can still charge interest if you're late. Even if you're correct about getting money back, it's possible that other expenses -- back child support or back taxes, for instance -- will eat into your refund. In that case, even filing promptly may not get you much back.
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- Maximizing After-Tax Income
- Do I Need an Itemized List of Donations to File Taxes?
- How to File a 1099
- What Is a CPA Firm?
- Can an IRS Auditor Show Up at Your House Without an Invitation?
- What Percentage of Federal Taxes Is Withheld From the Check if Filing Single?
- The Advantages and Disadvantages of Doing Your Own Taxes Vs. Hiring a Professional
- The Advantage of Filing a Personal Tax Exemption
- The Advantages of Filing Non-itemized Taxes